tv Bloomberg Daybreak Europe Bloomberg February 11, 2020 1:00am-2:00am EST
60,000 jobs. ♪ manus: welcome to "daybreak europe." we are on the road in abu dhabi. a lot of discussion here about what 2020 might hold. -- it has beenat frontloaded with a lot of risk. xi is using magical words about stimulus. good old-fashioned shovels in the ground traditional stimulus. re-manifestation of bubbles and leverage. nejra: good morning. perhaps that is why the equity market is taking the glass half-full approach, with u.s.
stocks hitting more records yesterday. manus: indeed. i am having one of those magic moments on the road where i cannot hear you. i will go with it and go through my board. let's talk about what is happening with the currency markets. the yuan is strengthening. some people talking about 3.8% growth in the first quarter. the bottom line is, the global growth story.
nejra: you are seeing futures in the green in the u.s. and europe. we could build on the record we had yesterday. japanese markets are closed. we see the yen retreating. we are seeingd, it build up. even with the currency near an 11 year low. we have had six days of losses. coronavirusto play risk, you want to short the european the death toll has now topped 1000 with cases surpassing 43,000. numbers of fatality are in china.
two health officials have been removed from their posts. made his firsts public appearance since the death of a doctor who spoke out against the virus. good to see you. give us the latest. in terms of those overall infections, above 1000 now. infectionsace of that is starting to slow down that is leading to that risk on move in the markets. some investors take comfort from that. we need to wait a few more days to see whether that stabilization can be continued. in singapore we have 45 cases. theirially a 30% hit to
tourism industry. we are seeing some big messes. i have been speaking to businesses. getting employees back into their offices. in terms of production, you see auto companies like tesla and forgetting production back. on the real estate frank, you see had 90% drop to new home sales. there is angry concern about lack of transparency. thank you very much.
let's bring the conversation to our guest host joining us in london. he is the head of bnp paribas market 360. let's go straight to the yuan. it is stoic and its desire to be below seven. we see it hold the line. we see the pboc withdrawing cash from the system. >> there will be upside to some extent that will be capped. despite of the macro environment. that is due to the phase one trade deal that we have.
the political preferences for some currency stability. the yen is likely to be more sensitive. because theonly trade linkages to australia but because of the central bank reaction function. nejra: has that now been put to one side? it has, what is the best way to trade that? >> it is definitely being challenged. it has been set to one side. markets have already shifted quite significantly.
we have seen a real shift and that positional dynamic. if we look across armed emerging-market strategy teams risk premium model. that suggests that current market crisis has a lot of bad news already. that favors a rebound. manus: where might those biggest rebound come -- rebounds come? they like receiving rates and selective high-yield others. mexico, russia, india, and indonesia. the moves we have
had in ethics. nejra: our guest stays with us for the hour. the e.u. is ratcheting up its demand. the move risks inflaming tensions with downing street. the block wants stricter terms on competition. prime minister boris johnson has already dismissed some of the demands. angela merkel will take an active role in choosing her new successor. that is after her heir apparent decided to step down and not run for the chancellorship.
president trump is suggesting deep cuts to social programs. the moves will push the debt higher. more list of policy aspirations. it has no federal power. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. coming up, he is standing in the wings. at the summit in abu dhabi. tune into bloomberg radio on your mobile device. this is bloomberg. ♪
manus: we are on the road at the conference in abu dhabi. nejra: i am in london. here's what you need to know today. we will get a sense of how the u.k. economy is faring one fourth to gdp numbers are published. christine lagarde is to to making a opening statement. the state of the u.s. economy is also in the spotlight, with jerome powell testifying before congress. new hampshire primary gets underway later today. this is the second test for democratic candidates. thank you very much.
finance leaders are gathered from around the world here. joining me now is one of the leaders of banking. very good to see you this morning. some say in to not expect a quick rebound. what is the biggest possible complicating risk of the coronavirus? >> i think it is the supply chain. it will affected severely. assume that businesses that were affected will need to look to change the dynamic. dependentoo heavily on china being more diversified. this could slow business investment. manus: what is the biggest risk right now? we are backstopped all the way.
what is the kinder side to that trade? >> the biggest risk is the consumer becoming less confident. u.s. economy has led global growth. if consumers all become less confident, if they start losing jobs, that can create a slowdown which will drag the economy into a recession. manus: but we are pretty far away from that, because it is a strong economy. >> on a relative basis. if you give enough shocks, you could see some slowdowns. manus: u.s. assets of those him -- exceptionalism was supposed to fade this year. does it continue? we expect the u.s. economy to
continue to grow for the rest of this year. will that mean that the emerging markets takeover? it depends on the issues coming out of china. whether they have a knock on the effect for the rest of the emerging market. i want to get your take on credit. where are they reaching? high-yield has become more in favor with a lot of investors. you have to watch some industries like pharmaceuticals and retail.
there is still fundamental value in the high-yield market. we have the semiannual testimony coming up. people are seeing that -- saying that powell will have to find his inner dove. what does that mean to you? >> i'm not sure what an inner dove means. manus: it probably means rate cuts. i think they are in a holding pattern for now. they need something to move them to ease more. i think they will hold steady for the time being. manus: i caught up with anthony scaramucci. he said he is still very defensive. have the the markets fed in a gordian knot.
eventually they will have to let the markets off the leash. would you agree with that? they have been the royal backstopped for 10 years. what is the consequence of a fed not responding to every moment of panic in the market? if you respond to everything, you have no conviction. i don't think the fed responds to everything. but they are mindful of the markets when they trend in a negative or positive direction. manus: at any juncture, we are reading stories about deficits. the deficit is rising. juncture, have we been
ignorant of those two? >> i don't think the markets necessarily focus on the level of the debt. at least when the market is absorbing bad news or drops, spreads wide now. invests capital there to in those markets draw. they are not in a freefall. thank you so much. have a good day here at the conference. let's get to the bloomberg business flash. alibaba is apparently blocked
from hong kong. it cannot be included. withxclusion of companies secondary listings was part of an agreement between the mainland and hong kong exchanges. t-mobile is poised to win court approval for its takeover of sprint. it is set to defeat a lawsuit that sought to block the deal. this is a huge win for t-mobile. will haveed company about 80 million monthly subscribers. the official decision could come as soon as today. boeing said it will take several quarters to join the global 727 max to the skies. the jet was taken out of service after two fatal crashes. boeing aims to get it flying again by mid 2020. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. coming up, the u.k. economy
around that uncertainty, we have retailers and consumers being slightly cautious. construction was flatlined. saying and 2020 the economy will air better. nejra: thank you so much. our guest is still with us. what is your research telling you about where the pound goes from here? >> q4 data will be close to irrelevant for the pound. a good signalides for current economic momentum. given the political regime shift we have had. the bank of england has left
rates on hold. what to the surveys continue to suggest or q1? pmi is released next week. that suggests no bank of england rate cuts. manus: it is very early in the year to categorize no rate cuts for the whole year. there are many risks that can the to bear, not least verbiage of negotiation with europe. >> i think that is fair.
brexit related trade uncertainty is likely to be a factor capping potential upside. that said, i think sterling can have a good move higher. have better activity data coming through at a time when the currency is highly data sensitive. not only because of the bank of england data dependence but the narrative around the global investor katie community underway sterling. they need to increase underlying asset holdings. that narrative is highly leveraged to growth expectations. not only are we like to have a bank of england on hold, but we are likely to see growth recovery. nejra: if sterling goes higher, will take the year with a? >> i don't think it will.
euro's current issues are idiosyncratic, especially against the dollar. the euro -40 basis points does not help. the dollar is the most attractive currently. . any upside in euro is likely to be capped. nejra: our guest is staying with us. we will talk more about the dollar. jay powell will testify. he gets his testimony to congress later on. we will bring you that's toyed next. no doubt there will be lot lot of questions asked about coronavirus. how much risk does it hold to the u.s. economy?
>> good morning from bloomberg, i'm nejra chahich. this is bloomberg daybreak. and these are today's top stories. coronavirus death tops 100. was hahn reports the highest number of fatalities but investors look past that following a record high on wall street. three is the magic number. jerome powell and mark carney oth testified today. daimler reports earnings in just a moment. they're set to unveil plans to axe as much as 15,000 jobs.
we speak to the c.e.o. later. nejra: equity markets taking a glass half full look as we saw records. green on the screen in asia. japanese markets are closed. but you're seeing the aussie bids. a touch of yen weakness. the euro holding at a 10-month low. the yield invered and that's more with coronavirus risk than anything to do with the u.s. economy. we get the reaction from around the world as we get the numbers from daimler that we'll bring you in a moment. good to see you both. july yet, let's kict off with you. what are you focusing on?
juliette: it looks like alibaba, the world's largest e-commerce company worth $580 billion could be blocked from that stock connect program linking our hong kong with chinese investors. this was to an earlier accord which saw the execution nair of companies. it was part of this arrangement and we saw alibaba's debut last year. we hear that they haven't made an exception to alibaba. this means investors can't buy into alibaba shares. you can see they're down .2 of 1%. this news came after the bell in wall street after they closed to .4 of 1%. nejra? nejra: amrie you're looking at six months of decline. where are we going? >> that's really the f.x. story.
it's not just the dollar. the euro is weaker against the yen. the swiss frank and the dollar. we are approaching these levels we haven't seen in 2017 and many are starting to cut their forecast. we could be lower for longer on the euro. what's impacting this? first of all, politics. we're seing this in ireland and germany. the center cannot hold. then it's weak manufacturing data. nothing showed that more out of italy, german and france. and finally the coronavirus. you can't point to anything data-wise but it's weighing on he minds especially with the euro, nejra. nejra: let's get back to the numbers from daimler. it sees 2020 group e bit above the 2019 level and then we that look the ditchdend proposing a 2019 div kend of 19 euro cents
per share. this is something the market was looking to. the dividend and the outlook for 2020 and that is what we get the two red headlines. daimler is seeing 2020 group unit sales slightly below 2019. so 2020 vehicle sales seem slightly below the prior year. but the ore think, of course thambings the markets were looking for here is the cost cutting and whether it was going to intensify at all and the c.e.o. reporting that they were going to be --s there was going to be a job cut plan. last year daimler said it would eliminate more than 10,000 jobs. no details of that right now. but it's likely to come up in the earnings call and any questions to the c.e.o. but the two red headlines is the e built significantly above the and of l level --
course any comments on coronavirus will be seized on as they have been with all executive speaking this earnings season and some comic having been hit with having close production in china. the yield curb is flurting reigniting fierce over the state the economy over jerome powell's testimony. a lot of people saying less about fierce about the u.s. more about the global corona view rhys. san francisco fed president that the economy is in a good place right now. sam lynnton brounl markets 360 is still with us. let's go through that yield curb inversion. are you onboard with what a lot of people have been saying this is all about global risk and not any indicator of a u.s. recession looming right now? >> i think that's fair while the fed are priced to 40 basis
points accumulate so 2020 will see this hasn't derailed the dollar whatsoever. and that ties in very much with the narrative that this has been a global reprizing narrowed elsewhere in the world driven by the global shock that we've been discussing all days. >> so what are you going to be looking out for for jerome powell? what signals are going to take from his strategy particularly round the coronavirus. sam: we heard events constituted a significant shock such that the fed considers it and the material assessment of the outlook. i believe today is too soon for that type of narrative to come through. in that respect, we could potentially see some near term dollar upside if it sounds more optimistic given what the market has shifted to prize in. our favorite expression of
dollar upside tactically is long dollar swiss. it has all of the benefits of the carry trade. the volatility adjusted is better than in those pairs. but we would argue that is more attractive valuation characteristics. dollar swiss is not very cheap. the swiss is not very cheap in contrast to the euro and the yen. and when we look across the positioning whie while has shifted sthauch it is now very sthoort pair. the same move has not been observed across your dollar yen. >> if jerome powell doesn't sound too negative for now on coronavirus that we might see some dollar upside. because the dollar has been acting as a safe heaven where we see speculations about risks, u.s., iran, the dollar
strengthens. but here your saying that the to dollar ad strengths. is ate case to be made from both sides for the dollar? >> i would suggest that it's because of the differentiation. it should be a further supportive factor for the dollar elow yield until currencies, alternative being less doveish could post something on his back. that perhaps implies higher strength. again, the key point here is to bring this what our models are telling us which is a lot of negative risk premier has all right been count. the ozzie dollar san example here. as we've seen overnight you, have quite a bit of reprizing hire no response to only
moderate to alleviation of concern. and that to us that the risk reward is asymmetry. there's a lot of bad news. >> just really briefly, if powell holds back, is the market going to push him to take ofa more doveish tone. >> the fed typically hasn't had that problem where less of his messages now forced them to the extent than equities had some turbulent neered between. and that's something that we would look for. >> stay with us. and of course, we'll have full coverage of jay powell delivering the report today. coming up -- larry fink may have butt the concerns. we'll talk to the ackvist.
nejra: this is bloomberg daybreak. europe's biggest tie maker see sales dropping this month because of the epidemic that adds to an already gloomy forecast of lower 2020 profit. joining us now is the c.e.o. of. thank you so much for chinaing us today. -- thank you so much for joining us. you say you're bracing yourself for a longer term negative impact? >> thank you, nejra, thank you for receiving me. effectively at this stage of the crisis of the coronavirus crisis it's very difficult to guess what's going to happen. our first concern was about our employees. and no one have been affected.
d of course, our factory resumed activities yesterday morning but we are concerned about the potential consequence of this situation. we know that ourselves will be negatively impacted in february. beyond that, it's extremely difficult to guess what is going to happen. and if the chinese economy is going to stop for a very long period, then it will have an impact on the entire supply chain and some industries including automotive. for the time being, we have no specific warning or no specific concern about our own supply. nejra: why did you decide to reopen the factories and did you decide moving production elsewhere? >> factories in china mostly dedicated to serve the chinese
market. so fortunately, we are very good sales in china, in december, and at the beginning of the year. so it is pretty low. that's why we needed to resume our factories. to the activity according it. >> you've lowered forecast for 2020, but those numbers don't actually take into account the impact of coronavirus yet. so how much worse could it get given the backdrop already that led to the lowering of the 2020 forecast? >> the 2020 outlook was mostly based on the trend of the different markets we are serving. we believe that over all the original equipment market in all and r activities
construction will probably be negative during the year. although the market will probably demonstrate a stable outlook. so our -- our thought for 2020 was based on this hip poth sys. we just mentioned that this was a systemic consequence of the coronavirus crisis, then it's much more difficult to guess what is going to happen. nejra:, yeah i mean, we have discussed some of the head winds from coronavirus. but is there a potential stale tale wind from lower commodity pry says from the coronavirus. er >> kit -- it can be one consequence. but at this stage of the crisis and knowing that the china just come back from the chinese new
year, holidays. it's extremely difficult to understand all the consequences of this situation in china. i just don't want to remind that china represents around 5% of our global sales. .t's a limited consequences we are less exposed than for example the pure automotive industries. >> understood. nd on the pure automotive eve, we have seen effects from carmakers in europe. what kind of conversations are you having with your customers? are they slowing down or slowing down any orders or anything like hat?
>> we have no specific concern or worries on that side. nejra: thank you so much for joining us. es chapot, c.f.o. of mitch lynn. nevada says a vaccine for coronavirus could take two years. the c.e.o. told bloomberg, the challenge will be coordinating a longer term response to the epidemic. >> it's been remarkable to see the response of the chinese government in tomplese largest quarantine that we've seen in modern times to tack this will epidemic. what i see is that we have these moments where we have these pandemics or epidemics.
we had sars. h1n1. had m, rs the ress patory syndrome. the pandemic and the epidemic phase and then the response goes down. and then the work stops or really di-mile-an-hours. the challenge is how do you maintain the effort in those gaps. how you do create the manufacturing capacity or the scientific know-how to respond in the next moment? i'm not sure we have tackled that. i think again and again this has been the repeat in history that we have with respect to pandemics. >> where should that leadership come from? is it world government or private companys? >> there's a group called sepi which is looking to try to bridge these gaps. but longer term, we do need government probably in the form of whether it's a g-20 or something along those lines. it's really come together to
have some sort of sustained pandemic response over time. otherwise we will have these moments and we'll be scrambling to have a good response. >> do you see it changing? >> we'll see. i think this will be an interesting moment. i mean, the scale is the current situation and the seriousness of this situation, maybe will motivate a bigger long-term response. >> i think you were in charge of the vaccines for h1n1. so this is -- usually takes what? five or six years to develop a vaccine. you did it in six months? in the case of h1n1 we did it in one. we understand very well. i think it was a very concerted effort. we'll see hopefully they can do something within a year or two. but it's important to note, they will do the clinical trial and then we'll get the vaccine. in all likelihood hope that this pandemic or this outbreak is then controlled. and then what will we do after that? i think that's the question.
♪ manus: larry fink has put climate change on the agenda. nejra, i'm going the hand it turnover you. ie what, do we need know? >> the pressure is starting to mount for larry frink. he promised to put climate change at the center of black rock. but climate activists barricade the premises spraying red paint
on the floor and covering walls with graffiti. it targeted the firm for it's investment in companys that damaged the environmentalistings ing -- environmental listings. they have seen this including new york and london. so the pressure is starting to mount for black rock which is the largest asset manager and its competitor as well to tackle environmental and social concerns. and he began cutting stakes in the biggest u.s. coal miner. these protestors show how much they need to know if they want to satisfy the harshest of the critics. >> thank you so much. now, the global economy is at . e mercy of the coronavirus he recommends buying more defensive picked income. gold ave flocked to
causing the precious metal to look expensive. yet, it remains an attractive price hedge. sam lynton-brown is still with us. sam, are investors getting more defensive and which currency is going to benefit? sam: we have seen investors getting more defensive and that's captured in the b.n.p. paribas and we've seen that in the australia dollar but we've seen it to a lesser degree in the australian dollar. the markets have been a bit bullish heading into this year, but because we have a data-dependant central bank in canada, the currency has underperformed across central banks combined with the move we've seen in commodity pry sys . at has duely hit
>> sam, i'm back with you i know you thought that i was going to have a little sojourn but we had a bit of noise issue. when i look at the battery conflict or the demolition and theer viss ration of the oil market, has that been reflected efficiently in the commodity currencies or is it all asymmetric risks? >> i think it is asim metric. we also need to remember that with these currencys that we refer to as the commodity currency, there's been a structural shift in what drives them. for the australian dollar it's been no, i know. and for the canadian dollar it's been crude. these curn sys are now the asingly sensitive to numbers. in order to drive the currencies it's actually the key fact for
i'm no to cud on here. so the effect of the global shock has been on the central bands is more important on the effect than the effect that it has on commodity prices. we see that across our models but we are at bn paribas. what does all this mean for the bank of canada? they have an explicit bias. they can become extremely cut to rate cuts. that would derail any potential games. but given how the market has already shifted to turn quite bearish, we would argue it is asymmetric from here but we could see more. nejra: and that's it for "bloomberg daybreak." it's been great to co-anchor with you from abu dhabi. the european of course, is next.
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♪ >> good morning, welcome to bloomberg markets the european open. i'm anna edwards live from our european headquarters here in the city of london. the cash trade is just over an hour away. anna: coronavirus deaths top 1,000. but investors look past the economic impact as global equities climbed. wall street hits another record high. european companies downplay the impacts of the virus. the